Forex Education -
Forex Technical Analysis
With Forex technical analysis, one tries to predict future price movements by analyzing historical market data. The majority of Forex traders use technical analysis to try to get an overall view of their investment’s price movements. Occasionally even a fundamentalist trader relies on technical analysis to get a better picture of a currency trend. With technical analysis, one can discern if the market is one a downswing, upswing or just moving sideways.
Technical analysis works by relying on a few assumptions:
• That all the fundamentals of the market are echoed in the price data. The underlying reasons for the price movements are not essential in technical analysis.
• The Forex market moves in repetitive patterns. These patterns are known as trends and are used as signals to govern a technical analyst investment strategy. The objective of technical analysis is to actually predict future trend by analyzing past trends.
• Because prices in the Forex market moves in predictable ways, Technical analysts do not believe that price fluctuations are random. Thus, once a trend has been established, it will continue for a certain period.
Using the technical indicators available under technical analysis, Forex traders are able to find suitable entry and exit points for their trades. Some of these technical indicators are reflected in price charts, volume charts and moving averages. Each type of technical serves a specific purpose like identifying trends or determining the strength or continuity of a trend. Technical analysis is actually more objective than fundamental analysis as it removes the emotional aspect of trading. Traders using technical analysis are generally more disciplined as they rely solely on the technical charts to form their investment decisions. Entry and exit points of a trade are determined and planned according to what the charts tells us.
The types of charts used by a technical analyst comprises of:
Bar chart
This is one of the most frequently used charts to show the price movements. Every bar indicates a time frame that can indicate one minute or several years. If the time frame is long enough, a pattern will emerged just by looking at the bar chart.
Candlestick chart
Candlestick charts are another type of chart that is commonly used by technical analysts. It is more complicated than a bar chart in so far each candlestick will depict the “high”, “low”, “opening” and “closing” price for the time frame that it represent. It provides more depth than a bar chart.
Point and figure chart
Point and figure charts are like bar charts only that the Xs and Os on the charts are for indicating adjustment in the price direction. These charts do not utilize time scale to relate to a specific day with a specific price action.
Apart from charts, there are also several frequently used technical indicators by the technical analysts. They include:
Trend indicators
These are used to smoothen out the price fluctuations so that the trend can be more easily seen. Examples of these are moving averages and trend lines.
Strength indicators
These are used to indicate how intense are the sentiments of the market by looking at the market positions held by the market participants. The core ingredients of strength are Volume or open interest.
Cyclic indicator
One of the most famous and commonly used theories to explain cycles in price fluctuations is the Elliot Wave theory. It looks at recurring season to try to determine when the next cycle will be.
Support & Resistance
In simple terms, Support and Resistance levels are levels where the market prices normally try to breach repetitively but fail to do so. A good example of this is trend lines.
Momentum indicators
With Momentum indicators, you can establish how strong or weak a trend will be as time passes. Momentums are usually the strongest when trends just started and weakest when they transformed.
What is Forex Day Trading -
Day Trading Indicators and Indicator Trading?
By definition, day trading is defined as the purchase and sale of a financial instrument within a single trading day. This is achievable in all the financial markets but is especially prevalent in the Forex market as this market of the MOST liquid of all financial markets. Normally day traders are a class of trader by themselves. They are well informed and are well capitalized. They use a high level of leverage to maximize their profit levels. They play a very important part in the Forex market as they essentially provide the Forex market with liquidity. In addition, they facilitate the smooth running of the Forex market with arbitrage. This article will take a look at day trading and the traders behind it.
As mentioned earlier, day traders are a class of their own as they are well educated and they do this kind of trade for a living. Unlike many retail traders, day traders are truly professional. And this class of traders has an in-depth knowledge of the Forex market. Thus to be classified as a day trader, there are some criteria to be met:
• In-depth knowledge and experiences with the market
Those who are new to Forex are strongly discouraged from trying to day trade. In most likelihood, novice traders will end up incurring losses.
• Enough working capital
Day traders only utilize their risk capital to free them from the stress and risk of possible financial ruin. In addition, because the margin are ultra thin, a day trader need a large capital to be able to profit form the intra-day price fluctuations.
• A Trading strategy
For one to have an edge over everyone else in the market, one must have a proper strategy before embarking in day trading.
• Discipline
Day traders are normally individuals with a strong sense of discipline. Without discipline, it is easy for one to end up trading based on emotion.
To help day traders in their trading decision, they rely heavily technical indicators indentify opportunities to make money. Some of the technical indicators used by them are:
Forex Technical Analysis
With Forex technical analysis, one tries to predict future price movements by analyzing historical market data. The majority of Forex traders use technical analysis to try to get an overall view of their investment’s price movements. Occasionally even a fundamentalist trader relies on technical analysis to get a better picture of a currency trend. With technical analysis, one can discern if the market is one a downswing, upswing or just moving sideways.
Technical analysis works by relying on a few assumptions:
• That all the fundamentals of the market are echoed in the price data. The underlying reasons for the price movements are not essential in technical analysis.
• The Forex market moves in repetitive patterns. These patterns are known as trends and are used as signals to govern a technical analyst investment strategy. The objective of technical analysis is to actually predict future trend by analyzing past trends.
• Because prices in the Forex market moves in predictable ways, Technical analysts do not believe that price fluctuations are random. Thus, once a trend has been established, it will continue for a certain period.
Using the technical indicators available under technical analysis, Forex traders are able to find suitable entry and exit points for their trades. Some of these technical indicators are reflected in price charts, volume charts and moving averages. Each type of technical serves a specific purpose like identifying trends or determining the strength or continuity of a trend. Technical analysis is actually more objective than fundamental analysis as it removes the emotional aspect of trading. Traders using technical analysis are generally more disciplined as they rely solely on the technical charts to form their investment decisions. Entry and exit points of a trade are determined and planned according to what the charts tells us.
The types of charts used by a technical analyst comprises of:
Bar chart
This is one of the most frequently used charts to show the price movements. Every bar indicates a time frame that can indicate one minute or several years. If the time frame is long enough, a pattern will emerged just by looking at the bar chart.
Candlestick chart
Candlestick charts are another type of chart that is commonly used by technical analysts. It is more complicated than a bar chart in so far each candlestick will depict the “high”, “low”, “opening” and “closing” price for the time frame that it represent. It provides more depth than a bar chart.
Point and figure chart
Point and figure charts are like bar charts only that the Xs and Os on the charts are for indicating adjustment in the price direction. These charts do not utilize time scale to relate to a specific day with a specific price action.
Apart from charts, there are also several frequently used technical indicators by the technical analysts. They include:
Trend indicators
These are used to smoothen out the price fluctuations so that the trend can be more easily seen. Examples of these are moving averages and trend lines.
Strength indicators
These are used to indicate how intense are the sentiments of the market by looking at the market positions held by the market participants. The core ingredients of strength are Volume or open interest.
Cyclic indicator
One of the most famous and commonly used theories to explain cycles in price fluctuations is the Elliot Wave theory. It looks at recurring season to try to determine when the next cycle will be.
Support & Resistance
In simple terms, Support and Resistance levels are levels where the market prices normally try to breach repetitively but fail to do so. A good example of this is trend lines.
Momentum indicators
With Momentum indicators, you can establish how strong or weak a trend will be as time passes. Momentums are usually the strongest when trends just started and weakest when they transformed.
What is Forex Day Trading -
Day Trading Indicators and Indicator Trading?
By definition, day trading is defined as the purchase and sale of a financial instrument within a single trading day. This is achievable in all the financial markets but is especially prevalent in the Forex market as this market of the MOST liquid of all financial markets. Normally day traders are a class of trader by themselves. They are well informed and are well capitalized. They use a high level of leverage to maximize their profit levels. They play a very important part in the Forex market as they essentially provide the Forex market with liquidity. In addition, they facilitate the smooth running of the Forex market with arbitrage. This article will take a look at day trading and the traders behind it.
As mentioned earlier, day traders are a class of their own as they are well educated and they do this kind of trade for a living. Unlike many retail traders, day traders are truly professional. And this class of traders has an in-depth knowledge of the Forex market. Thus to be classified as a day trader, there are some criteria to be met:
• In-depth knowledge and experiences with the market
Those who are new to Forex are strongly discouraged from trying to day trade. In most likelihood, novice traders will end up incurring losses.
• Enough working capital
Day traders only utilize their risk capital to free them from the stress and risk of possible financial ruin. In addition, because the margin are ultra thin, a day trader need a large capital to be able to profit form the intra-day price fluctuations.
• A Trading strategy
For one to have an edge over everyone else in the market, one must have a proper strategy before embarking in day trading.
• Discipline
Day traders are normally individuals with a strong sense of discipline. Without discipline, it is easy for one to end up trading based on emotion.
To help day traders in their trading decision, they rely heavily technical indicators indentify opportunities to make money. Some of the technical indicators used by them are:
No comments:
Post a Comment